The online gambling industry and Bitcoin are illustrating how profitable they can be when the two are put together with multiple casinos accepting digital currency payments. So much so, that between February and March, an average of $4,000 of Bitcoin was wagered every minute. But according to industry expert James Fuller of BigcoinGambling.com, Bitcoin gambling is just the tip of an enormous cryptographic iceberg and is currently distracting players and operators from something far more interesting happening deep within the belly of cryptocurrency betting.
“If you want to look at the bleeding edge of online gambling then it’s Ethereum and not Bitcoin that you should be watching,” Fuller told Cointelegraph. “Many casinos are experiencing a ‘fear of missing out’ when dealing with Bitcoin, but if they looked a little deeper they’d see that Ethereum’s smart contract technology is on the cusp of rewriting the industry as a whole.”
Bitcoin is succeeding as a replacement for fiat currency betting. Its value comes in its security and for some – anonymity – when playing at online casinos. Fuller says, though, that whilst this is a useful application of the currency, an entirely new paradigm is being formed on the back of Ethereum smart contracts.
Trustless online gambling has only recently been made possible through Ethereum’s enablement of smart contracts. Smart contracts, the code of which is publicly available for audit, ensure that a bet is paid out to the correct party based on agreed conditions between those involved. These contracts require no middlemen and a collection of contracts can replace entire gambling operators without any need for oversight – the code is guaranteed to run thanks to the Ethereum virtual machine. These smart contracts result in drastically reduced operational costs for the businesses that deploy them.
“With lower costs comes a lower house edge; and it’s possible that in the future, smart contract gambling applications will operate at a zero percent house edge,” says Fuller. “It’s hard to imagine what a gambling industry with zero percent house edge would mean for players and operators, but it would certainly shake up an industry that has stayed fairly stable for the past couple of decades.”
Fuller adds that with a zero percent house edge, though, other means of monetization would need to be found and competing with the marketing budgets of traditional casinos would be extremely difficult.
Profitability isn’t the only problem that’s holding back smart contract gambling applications, says Fuller, stating that smart contracts are still too young, which is witnessing problems with adoption and user experience that are ‘insurmountable at this moment in time.’
“We expect the status quo to remain as it is for at least the next two years whilst smart contract casinos have their ‘bells and whistles’ attached,” he added. “But developments beneath the surface of this market are moving fast and what we’re seeing may well swallow the gambling industry whole.”
The future of cryptocurrency gambling
It’s not just the traditional casino experience that Ethereum is expected to disrupt. Entirely new facets of online gambling are being realized, with Fuller positing that the prediction market platform Augur is proving itself to be the most promising real world application currently in development.
Augur aims to enable the forecasting of future events by allowing anyone in the world to make permissionless bets on any given outcome. Using the “wisdom of the crowd”, forecasters can make predictions with greater levels of accuracy, whilst players can stake and earn real value tokens (REP) if their prediction is correct.
Despite such promising applications for the betting industry, the reality is that gambling, a pastime whose origins can be traced back to Europe and China, is unlikely to change much anytime soon.
And yet, with the advent of Bitcoin and latterly, Ethereum’s smart contracts, trustless and permissionless betting could become a huge market in the not too distant future, says Fuller.
“Augur is doing some really interesting things that the mainstream public would want to get involved with, which is great because to get involved they’ll need to enter into the Ethereum Blockchain,” Fuller concludes. “Great for adoption.”